Blog: Work hard, play hard – in the safe sandbox

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Regulatory and industrial sandboxes were up for discussion at yesterday’s Finance IT Day in Copenhagen. Signicat announced the first ever identity sandbox for FinTech companies.

Written by Lars Møller Kristensen, Product Marketing Manager, Signicat

For most of us the feeling of being part of an important movement, the feeling of being a true frontrunner and first-mover, and the feeling of co-creating the rules of the future, and shaping the zeitgeist is rare. But occasionally something magical can happen, and you might, at least in a glimpse, get the sense of – collectively – hitting the wave right.

Yesterday at The Finance IT Day 2016 I had that feeling. What is happening at the moment in the financial technology industry globally is impressive. And as I watched the crowd of talented and ambitious people gathered in the main hall of Industriens Hus, I felt that Copenhagen actually has an opportunity of obtaining its fair share of the FinTech action going forward if the broad range of FinTech stakeholders manage to play it right together.

The FinTech vision

For the past year and a half, a group of public and private organizations, companies and authorities have worked hard “to make Copenhagen the leading FinTech hub in the Nordic region,” as Mayor Anna Mee Allerslev formulated the vision earlier this year. Several new projects have been started, and some of the results are a new and stronger version of CFIR by the name Copenhagen Fintech, the new FinTech co-working space Copenhagen Fintech Lab, Tryg’s InsurTech & Fintech co-working space The Camp, and Danske Bank’s The Hub.

The missing sandbox project

Although these are important projects for Copenhagen as a future FinTech hub, another highly important area – the regulatory treatment of the FinTech sector – still seems to lack the necessary attention from the Danish public authorities. Especially one thing seems to be in high demand amongst the regulated FinTech startups who want to operate in Denmark, and that is a kind regulatory sandbox like the one launched in May by the British Finance Conduct Authority (FCA).

FCA is the British counterpart to the Danish Finanstilsynet, and FCA was the first regulatory authority in the world to establish their sandbox as part of a comprehensive and progressive project called Project Innovate/The Innovation Hub. FCA’s Director of Strategy & Competition, Christopher Woolard, has described the overall project and the sandbox like this:

“The Innovation Hub was set up by the FCA to do two main things: Firstly, it provides direct support to innovative firms who are trying to launch new products into the market that we think might benefit consumers. And the second thing is that it is the center for our innovation policy “The regulatory sandbox” is where the government has asked us to look at if there is a way in which we can provide a safe space for firms to enter the market and experiment with some of the ideas that they may have.”

Especially one thing seems to be in high demand amongst the regulated FinTech startups who want to operate in Denmark, and that is a kind regulatory sandbox like the one launched in May by the British Finance Conduct Authority (FCA).

Several kinds of sandboxes

One of the main themes yesterday at the Finance IT Day was exactly the current need and potential for sandboxes in the FinTech sector.

Dea Markova, Head of Programmes at Innovate Finance, went through the British sandbox initiatives from FCA as mentioned above, and she underlined how these efforts in recent years had contributed heavily to the establishing of London as a leading global fintech hub.

According to Ernst & Young, the FinTech sector in the UK had a turnover of more than 6.6 billion pounds in 2015. The UK attracted FinTech investments for more than 520 million pounds the same year, and the UK FinTech sector employs more than 60.000 people. There is little doubt that the welcoming, open-minded and innovative attitude towards FinTech from the British FCA has its fair share of the credit for these impressing numbers (it is going to be interesting to see if and how much Brexit will slow down this progress).

According to Ernst & Young, the FinTech sector in the UK had a turnover of more than 6.6 billion pounds in 2015.

Since FCA established the first regulatory sandbox in the world in May this year, the idea has been copied by several other regulatory authorities throughout the world. At the moment you will find similar projects – in different stages – in places like France, Australia, Singapore, Thailand, Hong Kong, and Norway.

The industrial sandboxes

Dea Markova’s presentation yesterday was followed by a panel discussion about how to transfer the British sandbox ideas from the FCA into a Danish, Nordic or even cross-European context. In the panel – besides Dea Markova and myself – were people from Youlend, Spar Nord, Festina Lente, and Oslo Fintech.

I believe that everyone on the panel – and probably most of the couple of hundred people in the audience too – agreed that Denmark has a need for a regulatory sandbox if we want to realize the vision of positioning Copenhagen as a leading Nordic FinTech hub.

Unfortunately, the Danish FSA (Finanstilsynet) was not present in the panel or – I believe – at all at yesterday’s event, which was quite odd and obviously made it slightly difficult to send an immediate call for action to the regulator and the responsible minister.

Besides the regulatory sandbox, we need other kinds of industrial sandboxes that allow for startups to try out new solutions fast, easy and with no or little cost before they decide whether or not to take the next step.

The Signicat FinTech Starter Pack

In Signicat we have developed such an industrial sandbox within the area of identity. We call it the Signicat FinTech Starter Pack, and it is made for startups who need a safe test environment for identity features as part of their product or solution.

Ensuring compliance and staying on top of the regulation has a lot to do with handling identities and digital signing of legally binding contracts and documents. And the two disciplines are infrastructure services just like payments and preferably just a snippet of code or a plugin FinTech companies use when developing new business services or apps.

Some of the features that companies can test in the Signicat sandbox and that most financial apps need to deal with are:

• Onboarding new customers
• KYC (Know Your Customer)
• Accepting terms and conditions
• User consent

Signicat offers a full featured pre-production (test) environment for FinTech startups to explore and utilize. And when they are done testing it can all be deployed to Signicat’s production environment, if they choose so. Visit www.signicat.com/we-love-fintech and learn about how to get started.

Posted in Blog.